On March 11, 2021, President Biden signed into law the American Rescue Plan Act (“ARPA”). While ARPA is wide-ranging and covers a host of COVID-related needs, employers should be particularly aware of two important components.
Paid Sick Leave
As we know, the employer paid sick and family leave obligations under FFCRA ended on December 31, 2020. At the very end of the year, Congress passed a law that did not extend the paid leave mandates into 2021, but instead gave employers who were covered by the FFCRA the option to extend paid sick leave (“PSL”) and/or extended Family and Medical Leave Act (“EFMLA”) benefits to eligible employees who had not exhausted those benefits in 2020. If employers continued to provide that leave on a voluntary basis, they could receive the corresponding payroll tax credit until March 31, 2021.
While many commentators believed that Congress would pass some sort of mandatory paid leave provision in the new year, ARPA did not go quite that far. Instead, it chose to continue to encourage employers to provide COVID-related paid sick leave by extending the tax credits until the end of September, 2021 and expanding the qualifying reasons for leave in the following ways:
- Obtaining a COVID-19 immunization;
- Recovering from an injury, disability, illness or condition related to COVID-19 immunization; or
- Seeking or awaiting the results of a COVID-19 test or diagnosis because the employee has been exposed to COVID-19 or the employer has requested the test or diagnosis.
All of the six reasons that an employee could receive PSL under the FFCRA are still qualifying events for the tax credits. For a refresher on FFCRA-qualifying events, see: Trump Signs Families First Coronavirus Bill – Effective on April 2, 2020.
ARPA permits employers to receive a tax credit for up to 10 days of PSL per employee starting April 1, 2021, even if that employer had already taken a tax credit for those same employees prior to that date. In other words, if an employee exhausted her ten days of PSL before March 31, 2021, an employer could still get the tax credit for an additional ten days of leave from April 1, 2021 to September 30, 2021.
The PSL tax credit is based on the employee’s regular rate of pay if the need for the leave is related to immunization or testing (as described above) or due to the employee’s own symptoms, quarantine or isolation, up to a cap of $511 per day (or a total of $5110 per employee).
Under FFCRA, up to twelve weeks of EFMLA was available if the employee was unable to work or telework due to the COVID-related unavailability of a child’s school or day care provider. ARPA expands the reasons that tax credits can be obtained for providing EFMLA to include all of the reasons that PSL can be used (when an employee is subject to a quarantine or isolation order, where an employee is told to self-quarantine by a health care provider, where an employee is experiencing symptoms of COVID-19, issues related to immunization or testing, where an employee is caring for an individual who is quarantining, and where an employee’s son or daughter’s school or child care is closed).
Employers can receive a tax credit for providing up to twelve weeks of EFMLA. The available credit per employee is still limited to two-thirds of the employee’s regular rate of pay, with a cap of $200 per day. Importantly, the first two weeks of EFMLA no longer need to be unpaid, and therefore, the total cap has been increased from $10,000 to $12,000 per employee.
ARPA includes a non-discrimination requirement. An employer cannot take a tax credit if it limits PSL or EFMLA benefits to highly-compensated employees, full-time employees or employees on the basis of tenure. However, the employer can choose to provide only PSL or only EFMLA and still receive the tax credit.
We anticipate that both the Department of Labor and the IRS will issue additional guidance on these provisions in the near future, and we will keep you updated.
In addition to extending and expanding the FFCRA tax credits, ARPA also provides that the federal government will pay 100% of COBRA insurance premiums from April 1, 2021 through September 30, 2021 for employees who were terminated from their jobs or had their hours reduced so that they became ineligible for health insurance coverage during the pandemic. Importantly, the subsidy is available to terminated employees if they became eligible for COBRA at any point during the pandemic.
Employers will be responsible for funding the subsidy and will be reimbursed through a payroll credit against quarterly taxes – similar to the credits taken for FFCRA leave.
Under ARPA, a terminated employee who is eligible for COBRA and who has not elected it by April 1, 2021 (or who elected it and then discontinued it) may elect COBRA coverage during a special enrollment period starting April 1st and ending 60 days after the COBRA notification was delivered. Those individuals may receive the subsidy on a prospective basis.
Employers will need to be prepared to notify employees who might have had a COBRA-qualifying event in the past year and provide them with an opportunity to elect COBRA during the qualifying time period.
By May 30, 2021, employers’ COBRA notices will have to include information about the availability of the subsidy. The Department of Labor has been directed to publish a model notice within 30 days, which should ease the administrative burden on employers.
Please contact Heather Hammond (firstname.lastname@example.org) at Gravel & Shea PC if you have questions or would like assistance.